Criminal Defense Lawyers

Will the SEC Contact My Employer

Your employer will know about the SEC investigation before you do. This isn’t a possibility – it’s the standard process. The SEC doesn’t call you first. They subpoena your employer for your emails, your personnel records, your phone logs, your internal communications. Your company’s lawyers start reviewing your files while you’re still sitting at your desk thinking everything is fine. The investigation of you starts without you. By the time anyone contacts you directly, your employer has already been building a response strategy for weeks – and that strategy probably involves making you the sacrifice.

The question “will the SEC contact my employer” assumes the wrong timeline. The SEC has already contacted your employer. They’ve issued subpoenas for documents related to your conduct. Your company has hired outside counsel specifically to respond. Those lawyers have reviewed months of your communications looking for anything that might expose the company. And here’s what nobody tells you: those company lawyers don’t represent you. They represent the company. Everything you’ve told them trying to explain what happened? The company can hand that directly to the SEC to get cooperation credit. Your employer becomes the prosecution’s first witness against you.

Most people discover they’re under SEC investigation from their employer, not from the SEC. Your boss calls you into a conference room. Company counsel is there. They start asking questions about specific trades, specific communications, specific dates. You think they’re trying to help you. They’re not. They’re building their defense, and that defense requires someone to blame. The SEC rewards companies that cooperate by identifying and terminating employees involved in potential violations. Your termination isn’t a side effect of the investigation. It’s your employer’s cooperation strategy.

The Company Lawyer Trap That Destroys Careers

When the SEC starts investigating conduct at your company, the company hires lawyers. Expensive ones. You see them in conference rooms, asking questions, taking notes. You assume their there to help. Your employer is paying them, and you work for your employer, so naturally they must be on your side. This assumption has destroyed careers. Completly destroyed them. The company’s lawyers have one job, and that job isnt protecting you.

Company counsel represents the company. Not you. Not your interests. Not your career. The company. Their job is to protect the corporate entity from liability, and sometimes the best way to protect the company is to sacrifice the employee. When the SEC asks who was responsible, the company that points fingers gets cooperation credit. The company that protects its employees gets scrutinized harder. Your employer’s lawyers have done the math. Its not personal – its just business. You happen to be the math that works out in there favor.

Heres the thing. When company counsel interviews you about the investigation, everything you say belongs to the company. Attorney-client priviledge exists between the lawyers and the company, not between the lawyers and you. The company can waive that priviledge whenever it wants. And in SEC investigations, companies regularaly waive priviledge to demonstrate cooperation. Your candid explanation of what happend becomes Exhibit A in the SEC’s case against you. You gave testimony against yourself becuase nobody explained whos side the lawyers were actualy on. Nobody told you that the person taking notes was building the case against you.

This isnt hypothetical. SEC settlements specificaly note when companies provide “voluntary cooperation” by sharing internal investigation findings. That means everything discovered during those interviews with company counsel – your interviews – gets handed to regulators. The SEC dosent have to subpoena your statements. Your employer gives them away for free, in exchange for lighter treatment. Your candor becomes there cooperation credit. Your honesty becomes there defense.

The formal name for this is the “Upjohn warning” – named after a Supreme Court case were the court said corporate counsel should warn employees that they represent the company, not the individual. But heres the reality: many lawyers give this warning quickly, in legal language, at the begining of an interview when your nervous and not paying attention. By the time you realize what you agreed to, youve already talked for an hour. The warning was technically given. Your rights were technicaly explained. And you waived them without understanding what you were doing.

How Your Termination Becomes Their Cooperation Credit

In May 2020, Akazoo filed a Form 6-K with the SEC announcing they had fired there CEO “for cause.” The reason? A Special Committee found “conduct inconsistent with the Company’s policies” and specificaly cited “lack of cooperation with the investigation.” Think about that. The CEO’s termination was announced publicaly through an SEC filing. His firing wasnt a private employment matter – it was part of the company’s regulatory response strategy. The termination itself was the cooperation. His career destruction was there regulatory compliance.

SEC settlements consistantly reference companies that “terminated or placed on leave the employees involved” as a factor in cooperation credit. Your employer isnt just responding to the investigation. Your employer is being rewarded for destroying your career. The faster they fire you, the better they look to regulators. The more publicaly they distance themselves from you, the more credit they recieve. Your termination is litteraly a line item in there settlement negotiations. When company lawyers negotiate with the SEC, one of the things they offer is your head on a platter.

Heres the trap. If you cooperate with your employer’s internal investigation, everything you say goes to the SEC. If you refuse to cooperate with the internal investigation, you get fired “for cause” – just like Akazoos CEO. The refusal itself becomes evidence of wrongdoing. Either direction destroys you. Cooperate, and your words convict you. Refuse, and your silence fires you. There is no safe path through this. Both doors lead to the same place.

And your employer knows this. There counting on it. They need someone to blame, and your the obvious candidate. Every question there lawyers ask you is designed to build the case – against you, not for you. They want you to explain yourself becuase every explanation gives them something to hand to the SEC. The internal investigation isnt about finding truth. Its about finding a scapegoat who cooperates in there own destruction. Thats why they seem so understanding, so sympathetic. They want you to keep talking.

The 20-Year Coworker Conversation Mistake

You find out the SEC is looking into something at your company. Naturaly, you talk to the coworker who sits next to you. “Can you beleive HR is asking about those trades?” “Did they interview you yet?” “What did you tell them?” This conversation – the one that feels completly innocent – could land you in federal prison for up to twenty years. Thats not an exaggeration. Thats the maximum sentence for witness tampering under federal law. The SEC is a federal agency. There investigation is a federal investigation. And interfering with federal investigations is a serious crime.

The SEC subpoenas your coworkers. They ask about any communications regarding the investigation. Your coworker mentions that conversation you had in the break room. Now your not just being investigated for securities violations. Your facing obstruction charges. And heres the wierd part – obstruction charges often carry higher sentences then the underlying conduct. Martha Stewart didnt go to prison for insider trading. She went to prison for lying about allegations she was ultimatly acquitted of. The cover-up destroyed her when the underlying conduct might not have.

Any attempt to coordinate stories, discuss testimony, or align versions of events can be prosecuted as witness tampering or obstruction. It dosent matter that you werent trying to obstruct anything. It dosent matter that you were just talking to a friend. What matters is how it looks to prosecutors. And it looks like your trying to influence a witness in a federal investigation. Think about that before you say anything to anyone at work. Think about wheather that conversation is worth twenty years.

Prosecutors dont need to prove you intended to obstruct justice in the way you might think. They need to prove you corruptly persuaded or attempted to persuade another person to withhold testimony or documents, alter evidence, or provide false information. That break room conversation were you asked “what did you tell them?” can be characterized as attempting to learn what a witness said so you can align your story. You werent trying to do that. But thats how it looks. And in federal court, how it looks matters.

Arthur Andersen’s Warning: The Cover-Up Kills More Than the Crime

In 2002, Arthur Andersen LLP was one of the largest accounting firms in the world. Tens of thousands of employees. Global operations. Decades of reputation. Then Enron collapsed, and the SEC started investigating. Arthur Andersen wasnt destroyed for the underlying fraud. They werent even directly responsible for Enrons crimes. They were destroyed for witness tampering – for how employees were instructed to handle documents and communications during the investigation.

The firm was convicted of “corruptly persuading” employees to destroy documents. The conviction effectivly ended the company. Tens of thousands of people lost there jobs – not becuase of what Enron did, but becuase of how Arthur Andersen responded to the investigation. The cover-up destroyed them when the crime might not have. Thats the reality of federal investigations. The response matters as much as the conduct. Sometimes the response matters more.

Your employer knows this story. Every compliance officer knows it. Every general counsel has studied it. Thats why companies today are so aggressive about cooperation – they saw what happened to Arthur Andersen and decided they would never risk that outcome. The lesson they learned? Sacrifice employees quickly. Distance the company immediatly. Hand over everything the SEC wants before they even ask for it. And if that means destroying careers to save the corporate entity, so be it. Better your career then there company.

The FINRA Fifth Amendment Trap

If your registered with FINRA, you face a trap that dosent exist for other employees. The Fifth Amendment protects you from being compelled to testify against yourself in criminal proceedings. Thats a constitutional right. But FINRA isnt a criminal proceeding – its a regulatory body. And FINRA has there own rules about cooperation. Those rules dont care about your constitutional protections.

Invoke the Fifth Amendment in response to a FINRA request for information or testimony, and FINRA bars you from the industry. Automaticaly. No hearing. No appeal. Your career in securities is over – not becuase you did anything wrong, but becuase you exercised your constitutional rights. FINRA dosent care about your Fifth Amendment protections. They care about there rules, and there rules require cooperation. Your rights under the Constitution dont apply to there regulatory process.

The choice is impossible. Testify to FINRA and potentialy hand prosecutors the evidence they need to convict you criminaly. Or invoke the Fifth, lose your career, get barred from the industry, and destroy your livelihood while protecting yourself from criminal exposure. Criminal law says stay silent. FINRA says cooperate or your done. Both punish you. Neither protects you. There is no good option – only damage control. Your choosing between bad outcomes, not good and bad.

This trap is particuarly cruel becuase many people dont realize it exists untill there in the middle of it. Your attorney tells you to invoke the Fifth becuase theres parallel criminal exposure. FINRA bars you. Now your facing criminal charges AND your career is over. You invoked your rights and got punished for it. The system is designed this way. Its not a bug – its a feature. FINRA wants cooperation, and they get it by making the alternative unthinkable.

The Rolling Production Reality

SEC subpoenas typicaly give employers two to three weeks to respond. But the SEC allows “rolling production” – meaning your employer dosent have to produce everything at once. They hand over documents progressivly as they find them. First batch goes to the SEC. Then another batch. Then another. Meanwhile, your still sitting at your desk, completly unaware that regulators have been reading your emails for weeks. There building the case while you work.

By the time anyone contacts you directly, the SEC has already built there case from your own documents. They know what you wrote. They know who you communicated with. They know the timeline of events. They know what you said to your boss. They know what your boss said to there boss. Your going to be asked questions they already know the answers to. The interview isnt about gathering information – its about seeing if youll lie. And if you lie about something they can prove from your own emails, obstruction charges get added to whatever else your facing.

The SEC isnt waiting for your side of the story. They dont need it. Your employer has already provided everything – your communications, your records, your colleagues testimony about you. By the time you learn about the investigation, the narrative has been established without your input. Your playing defense against a case built from your own files, provided by your own employer, who got cooperation credit for turning you in. You never had a chance to explain becuase nobody asked you. They asked your employer, and your employer answered for you.

The Whistleblower Protection That Doesn’t Protect You

You might think whistleblower protection helps here. Rule 21F-17(a) prohibits employers from taking action to impede employees from communicating with the SEC about potential securities violations. The SEC has levied penalties up to $10 million for companies that retaliated against whistleblowers. But theres a cruel irony: whistleblower protection helps people reporting violations to the SEC. It dosent help people being investigated by the SEC.

Your employer cant fire you for reporting securities fraud to regulators. But they absolutly can fire you for being the subject of an SEC investigation. They can claim you failed to cooperate with the internal investigation. They can claim you violated company policy. They can claim your conduct created legal exposure for the company. Whistleblower protection shields the people turning you in. It dosent shield you from being turned in.

In fact, whistleblower protection makes your situation worse in one specific way. Your employer cant discourage employees from talking to the SEC – thats a violation of 21F-17(a). So your coworkers can freely report everything they know about you without any employer interference. The company cant tell them to stay quiet. The company cant coordinate there response. Everyone talks to the SEC independantly, and you become the center of a web of testimony your employer isnt allowed to manage. The protection that exists protects everyone except you.

Murray v. UBS Securities, LLC demonstrates the pattern. An employee reported suspected fraud to supervisors and was subsequently terminated. He had whistleblower protection. The law was on his side. But what about the people he reported? They faced termination too – except without whistleblower protection. The system is designed to encourage reporting and punish the reported. If your the subject of that reporting, the protections flow in one direction, and that direction isnt toward you.

Three Things to Do Before Your Employer Knows More Than You

If you think an SEC investigation might involve your conduct – or if your employer has started asking questions – you need your own counsel immediatly. Not the company’s lawyers. Your own. Someone who represents you and only you. Someone whos job is protecting your interests, not the company’s settlement strategy. The moment company counsel starts asking questions, you need someone in your corner who isnt incentivized to sacrifice you. This isnt optional. This is survival.

Second, understand that anything you say to company counsel belongs to the company. They can share it with the SEC. They can use it against you in termination proceedings. They can reference it in public filings. If your going to speak to company lawyers at all, do it with your own counsel present – someone who can help you navigate the difference between what your required to answer and what your voluntarily providing. Know the difference between cooperation and confession.

Third, say nothing to coworkers. Nothing. Not in the hallway. Not in the break room. Not over text. Not over email. Any conversation about the investigation can become witness tampering. Any attempt to understand what others are saying can become obstruction. The safest approach is complete silence with everyone except your own attorney. This feels paranoid until you realize the alternative is twenty years in federal prison for a conversation you thought was innocent. Paranoia is appropriate here.

Your employer will contact the SEC – or the SEC will contact your employer – before anyone talks to you directly. Thats how this works. By the time you know about the investigation, your employer has already been responding for weeks. The question isnt wheather the SEC will contact your employer. The question is wheather youll have your own defense ready before your employer makes you the sacrifice. That decision cant wait until after the interview with company counsel. By then, its already to late.